US stock futures tick higher after softer-than-expected CPI data

Investing.com-- U.S. stock index futures rose slightly in evening deals on Wednesday, extending a positive session on Wall Street after data showed consumer inflation cooled slightly in July, ramping up expectations for lower interest rates.

Wall Street indexes rose to two-week highs after softer-than-expected inflation readings on Tuesday and Wednesday, which fueled bets that the Federal Reserve will begin cutting interest rates from September. 

S&P 500 Futures rose 0.1% to 5,479.75 points, while Nasdaq 100 Futures rose 0.1% to 19.133.0 points by 19:20 ET (23:20 GMT). Dow Jones Futures rose 0.1% to 40,152.0 points. 

Fed expected to cut rates by 25 bps as inflation cools 

Softer CPI and producer price index readings this week showed that inflation was cooling, albeit at a staggered pace. 

CPI dropped slightly more than expected to a 2.9% annual rate in July, but grew 0.3% month-on-month. 

The readings furthered bets on an interest rate cut in September. But traders saw a greater chance for a 25 basis point reduction, over earlier bets on a 50 bps cut, CME Fedwatch showed. 

Still, lower rates bode well for stock markets, given that they free up liquidity that can be then invested into the sector. Economic growth also usually improves under lower rates.

Wall St at 2-week highs as volatility clears 

Wall Street indexes raced to two-week highs on Wednesday, extending a rebound from last week as fears of a U.S. recession eased, bringing down market volatility. 

The S&P 500 rose 0.4% to 5,455.21 points, while the NASDAQ Composite rose slightly to 17,189.05 points on Wednesday. The Dow Jones Industrial Average rose 0.6% to 40,008.39 points.

Expectations of lower rates also drove flows out of heavyweight technology stocks and into more economically sensitive sectors, with value stocks seeing increased inflows. 

Industrial production and retail sales readings are due on Thursday, and are expected to provide more cues on the economy.

Also on tap is quarterly earnings from supermarket chain Walmart Inc (NYSE:WMT), which is considered as a bellwether for retail demand. 

The earnings come after rival Home Depot Inc (NYSE:HD) warned of a weaker annual profit and clocked a bigger-than-expected drop in its annual comparable sales earlier this week.